Improving customer experience: show us the money
A lot of folks, myself included, have been writing about customer experience lately. This year has even been labeled the Year of the Customer, as companies scramble for new strategies to keep customers happy—and away from competitors.
It’s common wisdom that happier customers will spend more, stick around longer, talk you up to their friends, complain less and therefore cost less to service. But businesses operate on numbers. To make the best decisions and put our capital to the best use, we need to translate common wisdom into concrete data: How much, exactly, can we expect to take to the bank if we improve CX, and how much do we lose if we don’t? How much more will a satisfied customer spend or remain a subscriber?
I discovered some interesting answers to those questions and more in a couple of articles. I hope you’ll read the articles yourself (links are at the end of the post), but here are some highlights and brief takeaways I wanted to share.
More Than Double the Spend, Six Times the Staying Power
“The Value of Customer Experience, Quantified,” by Peter Kriss, compares good and bad customer experience using a transactional and a subscription-based model, both of them global businesses with revenues of over $1 billion.
- In the transaction-based business, customers reporting the best experiences spend 140% more than those who had the poorest quality interactions.
- In the subscription-based business, where the value is in customer longevity, members with the worst experiences will stay about a year. Members with the best experiences will likely stay another six years.
Another benefit of delivering good experiences: Kriss says that it actually reduces the cost of customer care, because unhappy customers are more likely to return products or call to complain, taking more agent and processing time.
One-Point Increase, Nine-Figure Advantage
In “The Revenue Impact of Customer Experience, 2015,” Forrester examines the revenue impact of improving customer service in certain industries, including wireless providers, luxury auto manufacturers, banks and credit card companies. Researchers calculated the potential annual revenue gain both per customer and per company if each industry’s average score on the Forrester CX IndexTM increased by one point.
The results were very different depending on the industry. For wireless providers, a one-point gain results in only a couple of bucks more per customer. That doesn’t sound like much—until you multiply it by the colossal customer bases. Forrester uses 82 million as an average per company (the largest providers, Verizon and AT&T, have over a quarter of a billion subscribers just between the two of them). Suddenly there’s the potential for a nine-figure boost.
There’s also an opportunity for comparable cost savings. Sprint, rated lowest in the industry in a J.D. Power study last year, announced a reduction in customer care costs of 33% by improving the customer experience.
Forrester says wireless carriers can achieve more by improving the poorest experiences than by trying to raise good service to excellent. The opposite is true in the luxury auto category. The market is only about 350,000 strong, but the product’s average price tag of $55,000 makes a one-point increase worth over $300 per customer. With every single buyer worth his/her weight in gold, delivering gold-plated customer service—upping good experiences to excellent—should be the strategy here. (I was really surprised that it isn’t, at the moment. None of the luxury car makers is currently rated excellent. To me, that’s a “golden” opportunity to gain a competitive edge.)
I was interested that Forrester found no link between increased spend and good customer experience in the credit card industry, and therefore doesn’t advocate that companies make big investments in CX. However, retail banks and TV providers both have good potential for upside from improving customer service at any part of the spectrum: from poor to satisfactory, from good to excellent.
Technology Solutions and the Power of One
With all these numbers being tossed around, the most important in CX is still One. As in, how to meet the needs and engage the emotions of each customer, one at a time, on his or her unique journey. Technology has the tools to keep pace with rising customer demands: Applications for customization, omni-channel connections, personalization, mobility, e-commerce, virtual assistants, seamless self-service solutions and more.
How can your company use technology to improve CX and leverage hidden revenue potential? Give Praxent a call to explore the possibilities.
You can find Peter Kriss’s article at The Value of Customer Experience, Quantified.
Go to Forrester for information on how to access “The Revenue Impact of Customer Experience, 2015.”
Other helpful resources on the subject are: